Canadian dollar hits one-week low as anti-lockdown protests in China rattle investors

The Canadian dollar CADUSD weakened to a one-week low against its U.S. counterpart on Monday, as anti-lockdown protests in China weighed on investor sentiment and data showed Canada’s current account balance swinging to a deficit.

Stocks and the price of oil, one of Canada’s major exports, suffered a broad sell-off as rare protests in major Chinese cities against the country’s strict zero-COVID-19 curbs hit growth expectations in the world’s second-largest economy.

U.S. crude prices fell 2.6 per cent to $74.31 a barrel, while the Canadian dollar was trading 0.6 per cent lower at 1.3458 to the greenback, or 74.31 U.S. cents, after touching its weakest level since Nov. 21 at 1.3473.

Canada posted a current account deficit of C$11.1-billion ($8.3-billion) in the third quarter after surpluses in the first two quarters of 2022, data from Statistics Canada showed.

“We expect deficits to persist into 2023 as trade and income flows return to more normal patterns,” Shelly Kaushik, an economist at BMO Capital Markets, said in a note.

Canadian gross domestic product data is due on Tuesday and employment data is set for Friday, which could help guide expectations for next week’s Bank of Canada interest rate decision.

Analysts forecast the data to show that the economy expanded at an annualized pace of 1.5 per cent in the third quarter and added 5,000 jobs in November.

Money markets expect the central bank to raise interest rates by 25 basis points at its policy decision on Dec. 7 and see a roughly 20 per cent chance of a larger hike.

Canadian government bond yields edged higher across the curve. The 10-year was up by about half a basis point at 2.942 per cent, after touching on Friday its lowest intraday level in more than three months at 2.905 per cent.

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